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Clearly, this August is not a restful month on the financial markets, which are purging a certain number of excesses against a backdrop of fears of a too marked slowdown in the American economy, instead of the scenario idealized until now, namely that of a soft landing (or kiss landing) of the first economy on the planet. The ISM manufacturing, Friday, combined with the content of the NFP report on employment Friday, catalyzed this turnaround in market psychology, even though the quarterly FANGAM figures came out at very contrasting levels.
All risk assets are affected, with the notable exception of the Euro. “Jerome Powell’s very cautious speech last week, evoking the risks of a “hard landing” for the economy if the Fed was not vigilant, as well as the “surprise” rate hike by the Bank of Japan, have reinforced market fears regarding the outlook for global growth, leading to a sharp decline in all commodities,” notes Alexandre Baradez, head of market analysis at IG France.
Stunned by a particularly trying session on Monday, the Paris Stock Exchange seemed disoriented. The attempt to rebound (+0.49%) in the morning was cut short, before the CAC 40 sank below 7,100 points in the afternoon (-1.09% to 7,070.02 points).
The US employment report for August “will probably be the determining factor in the rate cut trajectory,” Lombard Odier said. “This could be either 50, 25 and 25 basis point cuts in September, November and December respectively, or three rounds of 25 basis point cuts,” the asset manager continued.
In terms of values, while the quarterly ball is ending in a tense atmosphere, among the strongest increases in the CAC 40, we find Airbus which rose by 1.95% after announcing a rebound in its deliveries of its new aircraft in July, to 77 units after 67 in June and only 53 in May. On the SBF 120, Clariane jumped by 9.9%. The retirement home operator confirmed its annual objectives after publishing improved half-year results.
On the other side of the Atlantic, the main stock indices ended Tuesday’s session in the green, without however managing to significantly retrace the losses suffered since Thursday. The Dow Jones gained 0.76% and the Nasdaq Composite gained 1.03%. The S&P500, the benchmark barometer of risk appetite in the eyes of fund managers, is breathing a little, at 240 points above the symbolic 5,000 point mark.
An update on other risky asset classes: around 8:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1,0910. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $73.30.
On the agenda this Wednesday, to follow as a priority the monthly balance of the French trade balance at 8:45 a.m.
KEY GRAPHIC ELEMENTS
The leading index of the Paris market has broken the graphic level of 7,465 / 7,500 points, a floor weakened since June 14. The selling energy released is significant, in light of the inability to fill the opening gap, and in light of the increasing transaction volumes. The message delivered is negative. For the time being, the index remains magnetized by 7,465 points, a level which corresponds to the lower limit of a former gap (01/26). At the time, LVMH excited the market with an excellent quarterly copy. A market which is in a completely different psychological state this summer.
On Wednesday, July 31, the index completely filled the downward gap of July 24, bringing additional heaviness to the short-term configuration. On Thursday, August 1, it broke through 7,465 points, closing at the session lows, triggering the formation of a new bearish leg. This leg is in full expression phase.
A timid reaction, before relapse, is the preferred scenario.
FORECAST
Considering the key graphic factors that we have mentioned, our opinion is negative on the CAC 40 index in the short term.
This bearish scenario is valid as long as the CAC 40 index is trading below the resistance at 1.10 points.
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